Cloverleaf Enterprises, Inc., a corporation formed by an organization of approximately 1,400 owners and trainers of harness horses in Maryland, Delaware and Virginia, officially took over ownership yesterday of Maryland's two trotting tracks -- Rosecroft and Delmarva raceways -- with a major assist from Bally's Casino Holdings, Inc., one of the country's primary casino gambling firms.
Under what is considered an unusual agreement, Bally is lending the horsemen $10.6 million to buy the tracks and is being given free rein by Cloverleaf to run them.
Bally, according to Bernard J. Murphy, the company's vice president of corporate affairs and government relations, assumes all managerial functions today and will name a new chief operating officer "within a week." In addition, Delmarva, the track located near Ocean City that has been closed for live
racing this year, will reopen Thursday.
No one has yet been named to the CEO position, but industry sources said yesterday that the front-runner to replace current Rosecroft/Delmarva president Ted Snell is Dennis Dowd, president of Freehold Raceway in Freehold, N.J.
Dowd could not be reached for comment.
After a meeting yesterday marked by delays and some last-minute questioning, the Maryland Racing Commission voted to approve the transfer of the license and racing dates from the tracks' current owners, Colt Enterprises, to Cloverleaf, contingent upon review by the commissioners and the Attorney General's office of a management contract between the horsemen's organization and Bally.
Settlement between Cloverleaf and Colt was completed last night in the Baltimore law offices of Gordon Feinblatt.
Under the management agreement, which was not finalized until an hour before the commission meeting, Cloverleaf "will not interfere or involve itself with the day-to-day operation of the facilities."
However, a four-member Cloverleaf interim governing board has the authority to veto personnel hired by Bally and will control track policy such as inter-tracking and simulcast agreements and approval of annual operating and budget plans.
Commissioner Carol McGowan praised Bally's managerial expertise but added "it's a double-edge sword. The [management] contract gives Bally all the cards. People have expressed concerns to me that since Bally is a casino company there is a clear conflict of interest. Why should they want to see racing survive?"
But Murphy reassured the commissioners that Bally wants to see the state's standardbred industry thrive.
"We don't consider ourselves outsiders," he said. "We're a longtime corporate citizen of Maryland. We've made a $10.6 million investment and we want to protect it. There has been concern expressed that this is perceived as a subterfuge to get casino gaming [in the state]. Casinos clearly are a large part of our business. But we are also an entertainment company with health clubs and other entertainment components such as hotels, boxing and we're also a large provider of food and beverages. We look at live racing as part of our overall industry and I think by our every word and deed, we've shown we're committed to [Maryland's harness] industry."
John McDonough, an attorney representing Cloverleaf, said, "These are straightforward business loans with no contingent on getting [casino] gaming."
In a separate agreement, Cloverleaf has agreed to sell half of rTC Rosecroft/Delmarva for $4.8 million if casino gambling legislation is passed in Maryland and casinos are located at the tracks. In that event, Cloverleaf and Bally will split gaming revenues 50-50.
Under the management agreement reached yesterday, Cloverleaf will pay Bally a performance-based management fee based on the amount of prize money that is generated each year for purses. Once the aggregate purse level at the two tracks reaches between $9 million and $10 million, Bally will receive 1 percent or approximately $90,000. For each additional $1 million, the percentage increases a point until the purse level reaches $14 million. After that Bally is paid a flat 5 percent fee.
The management fee is paid in addition to operating expenses.
Charles Lockhart, Cloverleaf's executive director, said the horsemen "have achieved what we set out to do. We've prevented the tracks from going into bankruptcy. We're controlling our own destiny and at the same time have brought in proven professional managers to run the facilities. We think Bally will want to show just how successfully they can operate these tracks and will make them into a showplace."